Chart of the Day: Property prices could soar over ABSD price raise and LTV limits

High-end developers could suffer more from the ABSD price increase than mass market and mid-tier segments.

This chart from RHB shows a predicted price surge following the government’s policy to raise the Additional Buyer’s Stamp Duty (ABSD) rates and tighten Loan-to-Value (LTV) limits on home purchases as a cooling measure in the property market.

“We deem this set of demand-side measures as “very stringent” and a pre-emptive one, which will have a negative effect on buying sentiment, as well as slowing down property demand and prices in the near term,” RHB analyst Vijay Natarajan said.

The new rates will apply for second property purchases for both local and foreign buyers. With this, Natarajan thinks that high-end segments will get hurt more compared to the mass market and mid-tier segments which are more likely to be first-time buyers. 

The analyst believes that the new rates could push developers to rush with launches and target more first-time buyers through reducing unit sizes offering and some additional perks.

He mentioned City Developments as amongst the stocks that could get hit by the new policy. On the other hand, he thinks CapitaLand could experience minimal impact as it only have one property remaining in the launch pipeline.

Before the surprise announcement, RHB pegged the property price increases around 5% to 10% whilst transaction volumes were poised at a 15% rise.